CANBERRA

First of all, on behalf of the Japanese Trade Delegation, I have
to thank you for your hospitality. When I landed at the Fairbairn
Airport last Saturday, I found the air was much chillier than I
expected. On the following morning, it became warmer towards noon,
and I enjoyed my first game of golf that afternoon. Now, your
hospitality is warming us up. We are grateful for this kind
reception you are extending to us.

I am very glad indeed to meet you and other members of the
Australian Trade Delegation and to have the opportunity of
discussing the ways and means for developing trade between our two
countries to our mutual satisfaction.

1. It is the established policy of the Japanese Government to have
our trade relations with other countries developed on the basis of
equality and nondiscrimination as set forth in the General
Agreement on Tariffs and Trade. Therefore, it was a great
disappointment to us that on the occasion of Japan's accession to
the G.A.T.T. in September last year, certain countries including
Australia chose to invoke Article 35 of the said agreement and did
not enter into the G.A.T.T. relationship with Japan. Japan has
since been engaged in successive negotiations with those countries
in an effort to induce them to revise their trade policy towards
our country. Needless to say, our final objective in starting the
present trade talks with the Australian Delegation is to enter
into the G.A.T.T. relationship with Australia, since only thus
would it be possible to rectify the chronic imbalance of trade
between Japan and Australia in the normal course and to place the
commercial relations between the two countries on a lasting and
stable basis.

Should there exist any difficulty on the part of the Australian
Government in proceeding to the immediate application of the
G.A.T.T. provisions to Japan, we would like to explore the
possibility of overcoming the difficulty in the course of the
present talks.

2. We deem it absolutely necessary that Japan's heavy deficit in
the trade with Australia should be corrected by increased exports
from Japan to Australia. We believe that, in order to rectify the
present imbalance, opportunity should be given to Australian
importers interested in the import of Japanese goods in the same
manner as has been given to the importers from other countries.

More specifically, we would like to request that discriminatory
treatment imposed on the licensing of imports from Japan be
removed and the most-favoured-nation treatment with regard to
tariff matters be accorded to imports from Japan.

3. Now, in order to justify our request, we wish to invite your
attention to the recent trend of trade between our two countries.

In spite of the discrimination against Japan in Australia, our
purchase of Australian goods has been maintained at a highest
level, resulting in Japan's chronic heavy deficit. According to
the statistics of the Bank of Japan, our exports were A4 million,
A12.9 million and A26.8 million in 1953, 1954 and 1955
respectively, while imports from Australia were A78.1 million,
A40.9 million and A62.6 million resulting in Japan's deficit of
A74.1 million, A28 million and A35.8 million in the
corresponding periods. As from November 1954, Japan was listed in
the non-dollar countries in respect of import licensing in
Australia with the exception of Reserved List items, and our
exports to Australia increased to a certain extent in 1955.

However, our exports have considerably decreased since the last
months of that year, due to the intensified import restrictions
after April 1955. On the other hand, Japan's imports from
Australia have been kept at a very high level. Our imports during
the first nine months of this year amounted to A62.3 million
against our exports of A13 million, resulting in our deficit of
A49.3 million, which is projected to the vast annual rate of
A65.7 million. This deficit is no doubt the main reason for the
recent deterioration of Japan's sterling holdings. If such trend
of trade continues unchanged between the two countries, we are
afraid that we shall be compelled to reduce our imports from
Australia. I have to add that this sort of opinion has recently
gained strength in Japan.

4. Since our ideal is to expand our trade with foreign countries
on a well-balanced basis, we wish to avoid such an undesirable
situation by all means. It is for this reason that, in the Anglo-
Japanese trade talks now going on in London, our delegation is
requesting the United Kingdom delegation to accord more
opportunities for Japan's export to the sterling area as a whole.

In this connection, our particular attention is bound to be drawn
to Australia since our trade deficit against her is the heaviest
and yet our exports are much handicapped by the discriminations in
import quotas and tariffs. Much as we hope that the Australian
Government will soon find the way to relax the severe import
restrictions now in force, we think Japan must be given, in the
first place, the equal opportunity as compared with other
countries, in order to earn a fair share of whatever amount of
imports Australia is going to make from non-dollar sources. Here
we are only asking for non-discriminatory treatment, but not for
any special favour of your government. I think this is not an
unreasonable thing to ask, in view of the fact that Japan is one
of the best customers of Australia.

We have heard often of the fear felt in Australia as to the so-
called 'flooding' of the Australian market by Japanese goods once
the gate is opened. We assume, however, that so long as the
present import quota system remains in force, there cannot be any
flooding by goods from any country to such an extent as to
jeopardize Australian industries, even after discriminations have
been removed. Therefore, what we wish to propose to the Australian
Government at the opening of the present talks is this-Please give
a fair and equal opportunity to Japan and see what will happen, in
a spirit of mutual trust and confidence. We are quite sure that
the situation of which you are, afraid will never become true.

We understand that the Australian Government has introduced to the
Parliament on 24th October, an amendment to the Customs Tariff
(Industries Preservation) Act, 1921-36. Since this proposed
legislation will have important bearings on the imports from
Japan, we are much concerned about its interpretation and modus
operandi. We shall appreciate if the Australian Delegation could
give us authentic explanation on it in the early part of our
talks.

5. Prior to the opening of the present talks, the preliminary
exchange of views was made between the two Governments, producing
some useful results. We believe, therefore, that our basic
position has already been known to the Australian Government and
we are sure that favourable considerations are being given to it.

We, on our part, have carefully studied the points raised by your
side and we shall be able to clarify our position thereto in the
course of the present talks. It must be pointed out, however, that
the Japanese Government has not taken discriminatory measures
against imports from Australia in respect of licensing and
tariffs, and has maintained the purchase of Australian goods at a
very high level. Indeed, we have been treating Australian goods
not at all badly and I am sure that you all know it. We believe
that it is high time that some steps are taken by the Australian
side to place our trade on a fair, equal and stable basis. Removal
of discriminations is all the more urgently desired in the light
of our heavy and increasing trade deficit against your country. On
the other hand, it is needless to say that we shall give serious
consideration to any requests to be presented by you, in addition
to those already known to us, with the only proviso that it will
be rather difficult for us to consider at this stage some of your
requests which call for better treatment than those usually
regarded as the most-favoured-nation and non-discriminatory
treatments. Generally speaking, we shall be ready to enter into
discussions about such matters after Japanese goods are placed on
an equal footing with goods from other countries in respect of
import licensing and tariff matters.

6. In conclusion, I would like to assure you, Dr Westerman, that
my Delegation would do its best in trying to work out a trade
arrangement which will serve useful purposes in developing and
maintaining our trade relationship to the best interests of our
two countries.